[Congressional Record (Bound Edition), Volume 157 (2011), Part 8]
[Extensions of Remarks]
[Pages 11970-11972]
[From the U.S. Government Publishing Office, www.gpo.gov]




                            EGYPT ASSESSMENT

                                 ______
                                 

                          HON. ELIOT L. ENGEL

                              of new york

                    in the house of representatives

                         Monday, July 25, 2011

  Mr. ENGEL. Mr. Speaker, I rise to call attention to the Report on a 
Trip to Cairo, Egypt, written by R. Leslie Deak, and presented to the 
Policy and Planning section of the Joint Chiefs of Staff. Mr. Deak is 
an American businessman who has spent the last nine years living part 
of each year in Egypt. He is on the Board of Advisors of the Center for 
a New American Security and is a Trustee of the National Defense 
University Foundation.
  This is an interesting and important document, and I commend it to my 
colleagues.

            Egypt Assessment: Report on Trip to Cairo, Egypt

                          (By R. Leslie Deak)


                   Presented to J-5 JCS, May 11, 2011

       (Pentagon--Policy and Planning for Joint Chiefs of Staff)

       I just returned from two weeks in Egypt. During my trip, I 
     spent most of my time in Cairo reestablishing existing 
     contacts and developing contacts with new players in the 
     emerging power structure.
       I met with informed figures in the business, political, 
     legal, journalism and religious fields. I also had extensive 
     contact with our people over there to get their assessment 
     and to gauge their views against those from the Egyptians.
       The country is a transition that will likely end in a 
     manner not to our liking. There are some efforts that can be 
     undertaken at this time to help try to impact the outcome if 
     implemented rapidly.
       I have summarized the current situation, explored in more 
     depth the key areas of concern and suggested actions that may 
     help impact on the outcome.

[[Page 11971]]


     First Impressions
       The fall of Mubarak's regime is widely welcomed. There is a 
     palpable relief among people that the repression and 
     corruption are finally easing. This is mixed with an 
     uncertainty about what the future holds. This is very a much 
     an Inch Allah moment at all levels that I had contact with.
       The impression of the US is poor. We are viewed as a 
     contributory factor to the problems because of our prior 
     support for Mubarak and our wavering during the early stages 
     of the revolution. Our direct involvement in their affairs is 
     not welcomed. Our operating in the background and providing 
     support is more acceptable.
       The society in general is fascinated with the unfolding 
     spectacle of arrests, incriminations and the extent of the 
     corruption. Politics and then soccer are the subjects 
     discussed, in that order. Since there is uncertainty about 
     the future, most attention is focused on the past and day-to-
     day life.
       Prices are up by thirty percent from before the revolution 
     but people seem to take it in stride. The Government is 
     raising public employee salaries dramatically and is hiring 
     unemployed workers in great numbers in order to try to 
     maintain social stability. Continued and worsening inflation 
     in the near term is inevitable and the population is reacting 
     accordingly--retaining or acquiring property, jewelry, 
     hoarding, converting pounds to foreign currency when 
     possible, etc.
       Withdrawal of Egyptian Pounds was just liberalized. Foreign 
     currency withdrawals are restricted to the equivalent of 
     EL10.000 per day in foreign currency. Transfers abroad are 
     restricted to $100,000 maximum per account and need 
     individual approval from the Central Bank.
       Tourism, second largest source of external funds after 
     Suez, is off by 85%. Although the recent lifting of the USDOS 
     Travel Advisory initially helped increase interest in travel 
     from the US to Egypt, the recent sectarian conflict has been 
     a new setback. The consensus opinion is that travel will not 
     recover until the Fall at the earliest assuming that the 
     security situation stabilizes by that time.
       Recently, traffic police have returned to the streets in 
     Cairo but regular police, special police, detectives and 
     prosecutors have not yet returned. Our people have been 
     informed by sources they consider reliable, that police 
     presence is back up to 65%. Reliable Egyptian sources I spoke 
     with put the figure closer to 50%. Police salaries have been 
     increased ten-fold (to EL 3,000-4,000 per month) and law 
     school graduates are being recruited to become police. 
     Internal security is nonoperational and is supposedly being 
     overhauled. All US assisted police training programs have 
     been suspended over concerns of working with bad actors.
       While Cairo is safe during the daytime, at night there is 
     occasionally sporadic gunfire. Travel outside populated areas 
     carries dangers of hijacking. There is widespread carrying of 
     firearms by the population and no apparent consequence or 
     prosecution for use of deadly force in self-defense.
       Politically, the general belief is that things will work 
     out and that the Muslim Brotherhood will play a role in the 
     country's future but will not dominate. Unfortunately, I do 
     not agree with this assessment.
     Where Things are Heading
       The following analysis is conjecture on my part. However, I 
     vetted the conclusions against all of my sources in Egypt and 
     here and, sadly, found that none could refute them.
       Economics
       The country seems to be sliding towards a modified 
     socialism with the government set to play a significantly 
     increased role in the economy. We can expect that most, if 
     not all, of the economic reforms implemented over the last 
     five years to be rolled back.
       The government is already beginning to abrogate contracts 
     and seize properties implicated in any dealings with the 
     prior government. Since the Mubarak regime and their cronies 
     were involved in every aspect of the economy, no prior 
     business arrangement is immune--this is especially true where 
     deals were based on the use of or access to State assets 
     (land, businesses, natural resources, etc.)
       Another current problem for the private sector is that 
     there is no place to get a reliable or binding decision on 
     which to make business judgments since the current Cabinet is 
     transitional and their decisions are subject to change in the 
     future.
       The public sector is growing dramatically both in terms of 
     cost and size as the Supreme Council races to prevent 
     uprisings from the lower class.
       They recognize that they are going to soon be facing a 
     massive external liquidity squeeze and are casting about for 
     any sources of foreign funds available in order to be able to 
     continue to import essential staples. Their foreign policy 
     reflects this with their playing off the U.S., Iran and Saudi 
     to see who will give them money first.
       I believe we can expect increasing economic and, 
     eventually, social instability due to the deteriorating 
     economic trends.
       Politics
       In my opinion, I see little likelihood of the Muslim 
     Brotherhood not becoming the dominant force in Egypt in the 
     near term. This will occur despite the desire by the 
     population as a whole to have a more representative secular 
     government.
       To understand this conclusion, some background is in order.
       For the last eighty years, the Muslim Brotherhood (MB) has 
     been providing social services to a growing sector of the 
     population. They provide health care, education, food, 
     shelter, counseling, adjudicate disputes, etc. This impact 
     has become especially pronounced over the last thirty years 
     as increasing resources were diverted from government 
     services and wound up in the pockets of corrupt officials. 
     During this time, the MB had developed a highly efficient 
     network that is well integrated into the society throughout 
     the country and especially in the poorer areas and in the 
     rural areas in Upper Egypt (the South) and the Delta.
       The military, which is a conscript army, is largely drawn 
     from this lower socio-economic half of the population. 
     Accordingly, they are familiar with, and are largely 
     sympathetic to, the MB. They do not currently view them as a 
     threat. In fact, virtually all of the Military officers I 
     have met over the years are religiously conservative as are 
     their families.
       An alliance with the MB does not pose an issue for the 
     military and in fact helps solve two critical issues that the 
     military faces.
       The first issue is complicity--the military leadership is 
     assumed to be complicit in all of the corruption and problems 
     of the old regime. They have been able to shelter almost all 
     of the ex-military from prosecution, but pressure is mounting 
     to throw them to the wolves. This does not bode well for the 
     current leadership and they are focused on protecting 
     themselves from prosecution with any new civilian government 
     that they allow to emerge. I believe that they have reached 
     this accommodation with the MB.
       Secondly, is the issue of the patronage system. The 
     military controls thirty percent patent of the economy and 
     much of the land in Egypt. The proceeds from these 
     enterprises and sale of land are used to provide benefits and 
     perks to the officer corps so as to maintain loyalty and 
     discipline. If anything interrupts this arrangement, the 
     senior staff faces the danger of possible insurrection from 
     the junior officers. I believe the MB recognizes the need to 
     maintain this system and has reached an accommodation with 
     the military to continue it.
       With these two issues apparently resolved, I believe that 
     the military cleared the path for accelerated elections in 
     September knowing that the MB would dominate the elections 
     despite the desire by the opposition forces to see a more 
     balanced and secular (civil) outcome. They then dissolved the 
     NDP in order to further strengthen the MB.
       Unfortunately, barring a change in the timing of the 
     elections or a suspension by the Military due to security 
     concerns, the MB will sweep the elections simply due to their 
     organizational capabilities. They recently raised their 
     public target from 35% to 50% of the seats. I personally 
     believe that they will ultimately win more than 70% of the 
     seats. This will place them in position to dominate the 
     process that will result in a new constitution that has been 
     mandated as part of the recent referendum.
       Except for the MB, there is no organization with the 
     capability to get out the vote. The opposition is highly 
     fragmented and disorganized. There is a possibility that the 
     old parliamentarians may run for election independently and 
     serve to weaken the MB, but it is unlikely. The old members 
     benefitted from their positions in Parliament and under the 
     current environment will most likely not run (as one told me, 
     it cost him EGP 5 million to win each election but he could 
     make EGP 50 million through his position--he has no interest 
     in exposing his past activities of running again with no 
     prospect of recovering his investment--I believe this is 
     representative of the situation in general).
       While this has been going on in the background, much 
     international and public attention has been kept focused on 
     the Presidential election. This is a diversion since the new 
     President will have very proscribed powers. The MB has 
     indicated that they will not run, but they are negotiating 
     with the candidates and will throw their weight behind the 
     one that will assure their interests.
       The recent issue with the Salafis is largely viewed as 
     manufactured by the MB in order to make the MB appear more 
     moderate. I would personally expect that the MB and the 
     military will resolve the Salafi problem once it has served 
     its purpose.
     What Can be Done
       The first thing that needs to be done is to improve our 
     image with the Egyptian people. We can do this through 
     several actions.
       First, we could use our current available resources to help 
     locate and freeze funds that belong to the long list of 
     individuals under detention or indictment. Publicizing our 
     efforts to assist in this manner will be front page news 
     throughout the Middle East and will have an enormous positive 
     impact on public perception of the U.S. in Egypt. I recommend 
     this while at the same time acknowledging the broader impact 
     such an action may have on investors from other countries.
       Secondly, we should remain neutral and supportive of the 
     election process and their

[[Page 11972]]

     right to set their own destiny regardless of the outcome. It 
     will be very important for us not to be seen as judgmental 
     of, or in opposition to, the outcome of the election. Any 
     perceived effort on our part to influence the election will 
     backfire and both damage our reputation and adversely impact 
     any individual or group perceived to be supported by us.
       This does not mean that we have to sit back and accept the 
     long term impact of the elections.
       If we hope to see the situation improve, then the next, and 
     immediate, focus should be to ramp up our efforts to work 
     with groups that can bring influence to bear on the 
     constitutional process. These include the opposition groups, 
     the youth groups, the emerging parties, the Copts and the 
     military and possibly the new President once we know who it 
     is.
       The only way to short-circuit the MB dominating the 
     constitutional process after the election is to help the 
     opposition organize to focus the issues and bring people out 
     in to the streets again. We can also try to work in the 
     background to convince the military that it is in everyone's 
     interest to assure a balanced and open constitutional 
     process. The street protests will help in this effort.
       To the extent that our assistance is requested, we can also 
     work with those domestic change agents with whom contact has 
     already been established in order to help them work towards 
     an open process so as to assure a fully representational 
     political process in the future.
       As long as the constitutional process can be opened up so 
     that it is representative, it is likely that the MB will be a 
     one-election phenomenon and that we will see an outcome like 
     Kuwait. Any group that wins this election is doomed to fail 
     because of the deteriorating economic and security situation. 
     The only real concern we should have is what happens next. I 
     believe that we can have an impact on that outcome which will 
     serve the interest of both Egypt and the U.S.
       However, our window of opportunity is closing quickly.

                          ____________________